Autodesk Inc v Dyason

Supreme Court of NSW|2018-07-05|Before: Gleeson JA

Solicitors: McLean & Associates (Applicant) CLH Lawyers (Plaintiff / Respondent) Assured Legal Solutions (Liquidator) File Number(s): 2018/77192

Judgment

GLEESON JA: This judgment deals with the question of costs following orders made by the Court on 29 June 2018 setting aside the winding-up and costs orders made on 12 April 2018, dismissing the originating process filed on 9 April 2018 with no order as to costs, ordering the plaintiff to pay the applicant's costs of the amended interlocutory process filed on 25 June 2018, and reserving the question of who should pay the liquidator's costs and remuneration: Re Complete Investing Services Pty Ltd (in liq) [2018] NSWSC 1003 (the principal judgment).
As to the liquidator's costs and remuneration, the plaintiff (Roam) says that such costs should be paid by the defendant (the Company). The applicant, Mrs Bobette McMillan, the sole director of the Company, says that there should be an apportionment of the liquidator's costs and expenses, 75/25, with 25 percent to be borne by the applicant, or alternatively, Mrs McMillan accepts an apportionment of 50/50 in accordance with the preliminary view indicated by the Court when delivering reasons for judgment on 29 June 2018.
Roam also seeks to set aside or vary the costs order (order 4) made on 29 June 2018 in relation to the amended interlocutory process. Roam says that it has not been heard on that question, and relies upon the Court's power under Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.16(3A), to set aside or vary the judgment or order under r 36.16(1), as if the judgment or order had not been entered.

Relevant principles

The Court has a wide discretion to award costs under s 98(1) of the Civil Procedure Act 2005 (NSW). The ordinary rule is that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs: UCPR, r 42.1. Here, the relevant "event" was the practical result of Mrs McMillan's successful application to set aside the winding-up and associated costs order: Windsurfing International Inc v Petit (1987) AIPC 90-441 at 37,861-37,862 (Waddell J).
The power to set aside or vary a judgment is to be exercised "with great caution" in view of the public interest in the finality of legal proceedings: Autodesk Inc v Dyason [No 2] (1993) 176 CLR 300 at 302; [1993] HCA 6. The general rule stated in Bailey v Marinoff (1971) 125 CLR 529; [1971] HCA 49 at 530 by Barwick CJ (on an appeal from the Court of Appeal) is that: Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance, in my opinion, beyond recall by that court. It would, in my opinion, not promote the due administration of the law or the promotion of justice for a court to have a power to reinstate a proceeding of which it has finally disposed.
The 14-day window afforded by UCPR, r 36.16(3A) creates an exception to the principle that ordinarily a court has no power to set aside a final judgment after it has been entered: Malouf v Prince (No 2) [2010] NSWCA 51 at [11] (McColl and Macfarlan JJA and Nicholas J) and the cases there cited. As Basten JA explained in Deputy Commissioner of Taxation v Meredith (No 2) (2008) 75 NSWLR 462; [2008] NSWCA 133 at [15], the purpose of the rules in UCPR, r 36.16(3A) and (3B) is to allow a window of 14 days after entry of judgment, in courts where entry takes place automatically and largely contemporaneously with the delivery of judgment.

Costs of amended interlocutory process

It should be accepted that it is appropriate to reconsider order 4 made on 29 June 2018, in circumstances where the solicitor for Roam had indicated at the hearing on 25 June 2018 that she wished to be heard on the question of costs and sought to rely upon without prejudice correspondence, which properly was not tendered during the hearing (Tcpt, 25 June 2018, 41 (11-28)-42 (1-9)). That correspondence has now been put before the Court in an affidavit of Ms Monica Daley sworn 4 July 2018. Mrs McMillan also relies upon the correspondence annexed to the affidavit of her solicitor, Ms Karen McLean, sworn 5 July 2018.
Roam submits that the vast majority of costs incurred by Mrs McMillan was in relation to disputing the debt the subject of the statutory demand and requesting documents which Roam does not have in its possession and which Mrs McMillan had been advised Roam did not have. Roam submits that the costs incurred by Mrs McMillan are significant and largely misdirected.
Roam also points to the absence of evidence as to solvency when Mrs McMillan first filed her application. Roam submits that this asserted deficiency was raised in communications with Mrs McMillan's solicitor commencing on 27 April 2018, but only on 23 May 2018 did Mrs McMillan indicate that further evidence was to be relied upon; that the hearing of the application was adjourned at the request of Mrs McMillan on a number of occasions (specifically on 30 April 2018, 14 May 2018, 28 May 2018 and 18 June 2018); and it was only on 19 June 2018 that Mrs McMillan served the affidavit evidence concerning solvency, which was late.
Mrs McMillan submits that she did not engage in disentitling conduct, nor conduct amounting to any of the factors considered by Campbell JA in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [97]-[98], referring to the examples of misconduct in the litigation or the circumstances leading up to the litigation identified by McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at 97-98; [1998] HCA 11 at [69].
As to Roam's complaint in relation to costs incurred in dealing with the dispute in relation to the debt and delay, Mrs McMillan submitted that such costs were not sufficient to warrant altering the costs order that has already been made. According to the submission, Roam's response to Mrs McMillan's enquiries were minimal, Roam did not produce the documents that were requested, Roam did not answer the notice to produce and responding to the dispute in relation to the debt was a reason advanced by Roam when it sought to adjourn the hearing of the application on 25 June 2018.
Mrs McMillan also submits that Roam's complaint in relation to the timing of the evidence on the question of solvency should be put aside in circumstances where that evidence was insisted upon by Roam and the adjournments of the proceedings in order for Mrs McMillan to file that material were either consented to, or at least not opposed by, Roam.

Decision

The procedural history of this matter is unfortunate to say the least. What should have been a relatively straightforward application to set aside a winding-up order made in the absence of a party became bogged down in a dispute as to the existence or amount of the debt the subject of the statutory demand, as well as another debt in respect of toll notices claimed by another client for whom the solicitors for Roam acted.
It is important to keep in mind that the nature of the evidence concerning solvency required for the purposes of an application to set aside a winding-up order made in the absence of a party relying upon UCPR, r 36.16(2)(b), is not of the same degree as the requirement that there be "proof" of solvency in the sense that the company demonstrate that it would be able to defeat the application for winding-up: see principal judgment at [12].
I do not regard the queries by Mrs McMillan in relation to the debt as unnecessarily protracting the application. Nor do I consider those queries misdirected. First, the solicitors for Roam demanded payment of the debt the subject of the statutory demand, and also another debt claimed by another client, as a condition of Roam's consent to setting aside the winding-up order. Second, it was not unreasonable for Mrs McMillan to attempt to obtain documentary evidence supporting the existence and amount of the alleged debts.
It may be accepted that some of the arguments relied upon by Mrs McMillan disputing the winding-up order, such as non-service of the originating process on the Company were unsuccessful. However, given that Ms McMillan provided a satisfactory explanation for the Company's failure to appear at the hearing of the winding-up application, and also demonstrated that the Company was solvent, it is not appropriate to deprive her as the successful party of costs or a portion of the costs on the issues upon which she was unsuccessful: Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]. This is not a case where the issue of non-service of the originating process on the Company was clearly severable from the issue of the explanation for the Company's non-appearance at the hearing, such that there should be an apportionment of costs on the grounds of mixed success on various issues: cf Chen v Chan (No 2) [2009] VSCA 233 at [10].
Although there was delay by Mrs McMillan in filing evidence on the question of solvency, I am not persuaded that Mrs McMillan's conduct unnecessarily protracted the litigation, with the exception of the costs of the directions hearing on 18 June 2018, which were wasted, because Mrs McMillan was late in filing evidence concerning solvency. Otherwise the delay by Mrs McMillian is offset by Roam maintaining its opposition to Mrs McMillan's application after 19 June 2018, including during the hearing on 25 June 2018.
The costs order made on 29 June 2018 should be varied, but only to exclude the costs thrown away and occasioned by the directions hearing on 18 June 2018.

Liquidator's costs and remuneration

Roam submits that the winding-up orders were validly made and that it did not act inappropriately in obtaining those orders. Roam again emphasises the matters referred to above, namely, the delay by Mrs McMillan in the pursuit of her application and submits that the vast majority of costs incurred by the liquidator were as a result of those delays.
Roam submits that the Company should pay the costs and remuneration of the liquidator given that all documents were deemed served on the Company by Roam, the winding-up order was set aside on the basis of solvency evidence which was not adduced at the hearing of the winding-up application, and all adjournments of the application were at the request of Mrs McMillan and accordingly, the length of time that the liquidator was appointed was due to her actions.
Roam referred to offers made to resolve the application commencing with an offer on 27 April 2018 not to oppose the application on condition that all debts (including the debt of another creditor) and costs of $18,251.40 were paid. That offer was repeated on 10 May 2018. Those offers were not accepted. Mrs McMillan made an offer on 17 May 2018, which was rejected, and Roam made an offer on 25 May 2018, which was rejected. It is not necessary to refer to the terms of those offers.
Mrs McMillan referred to further offers made to resolve the application which included offers to pay part or all of the liquidator's costs. According to the submission, those costs would have been at a lower amount than they were at the final hearing.
Relevantly, Mrs McMillan made an offer to Roam on 7 June 2018 that included a proposal that Mrs McMillan and Roam equally share the costs of the liquidator and there be no order as to costs of the proceedings. That offer was not accepted.
Roam made an offer to Mrs McMillan on 21 June 2018, which included that Roam and Mrs McMillan would each pay 50 percent of the liquidator's fees, that the proceedings be dismissed and that there be no order as to costs of the proceedings with each party to bear their/its own costs. That offer was rejected by Mrs McMillan.
Mrs McMillan made two offers to Roam on 22 June 2018. The first offer included a proposal that Mrs McMillan and Roam equally share the costs of the liquidator and that Roam pay 50 percent of Mrs McMillan's costs. That offer was not accepted. The second offer included a proposal that Mrs McMillan pay 100 percent of the liquidator's costs and that Roam pay a fixed and compromised amount of the applicant's costs (being $25,000). That offer was not accepted.
Mrs McMillan submits that she ought not to bear the whole of the liquidator's costs and remuneration due to the rejection of the offers made by her.

Decision

It is apparent that, at one point shortly before the hearing there was a consensus between Mrs McMillan and Roam that the liquidator's costs and remuneration should be borne equally by Roam and the Company; however, there was an impasse as to who should bear the costs of Mrs McMillan's application. Ultimately, Mrs McMillan was successful in setting aside the winding-up order.
Given the circumstances recounted in the principal judgment at [32]-[33] and [34]-[44], it seems to me that Roam and the Company bear relatively equal responsibility for the circumstances in which the winding-up order was made in the absence of the Company and that they should equally bear the costs and remuneration of the liquidator. I do not consider that a different order should be made because of the adjournments of the application or the late service by Mrs McMillan of evidence on the question of solvency.
The orders made on 28 May 2018 required Mrs McMillan to file and serve her evidence by 12 June 2018. That evidence was filed and served on 12, 14 and 19 June 2018. Instead of being ready for a hearing on or shortly after 18 June 2018, the application was adjourned on that date to 25 June 2018, when it was heard. The costs incurred by the liquidator after 18 June 2018 (according to Ex L1) were $373.00. Those costs related to reviewing the four affidavits relied upon by Mrs McMillan and would have been incurred by the liquidator in any event, even if the affidavits had been filed on time.
In my view, the appropriate order is that the liquidator's reasonable costs and remuneration up to and including 25 June 2018 be paid equally by Roam and the Company.

Orders

The Court makes the following orders: 1. Vary order 4 made on 29 June 2018, by excluding from the costs payable by the plaintiff to the applicant, the costs thrown away and occasioned by the directions hearing on 18 June 2018. 2. Order that the plaintiff and the defendant each pay to the liquidator, Mr Jason Porter, 50 percent of the liquidator's reasonable costs and remuneration in respect of the administration of the defendant, up to and including 25 June 2018.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 July 2018

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